On Tuesday, President Trump enacted two executive orders aimed at reducing certain tariffs on car manufacturers. He responded to concerns from companies like Ford and General Motors, which argued that these tariffs would hurt U.S. manufacturing by increasing production costs and lowering profits.
The modifications mean that carmakers who currently face a 25 percent tariff on auto imports will not have to pay other tariffs, such as those on steel and aluminum or specific imports from Canada and Mexico, as outlined in the orders. However, it’s worth noting that this doesn’t shield automakers from steel and aluminum tariffs imposed on their suppliers.
Carmakers can also get relief from tariffs on a portion of their imported parts, although these benefits will be phased out over the next two years.
Before heading to Michigan, Mr. Trump remarked that his administration aims to support automakers during this “short-term transition.”
“We didn’t want to penalize them if they couldn’t obtain parts,” he stated.
This latest tariff reduction reflects the challenges and economic unpredictability that the Trump administration’s aggressive tariff policies have posed for American businesses. However, analysts warn that even with these concessions, the policies will still inflate vehicle prices and jeopardize the finances of automakers and their suppliers.
Mr. Trump signed the orders aboard Air Force One while traveling to Michigan, which is home to the nation’s major automakers, to commemorate his first 100 days in office.
While automakers have welcomed any easing of this tariff burden—citing concerns over price increases and declining sales—the continuation of a 25 percent tariff on imported vehicles, effective since April 3, and a new tariff on auto parts starting this Saturday will still raise costs for both new and used cars and impact repair and insurance expenses.
On the same day, General Motors revised its previous optimistic profit forecast for the year downward due to uncertainty surrounding Mr. Trump’s trade policies. The company, which sells the most vehicles in the U.S., indicated that any future profit estimates are now merely speculative.
“The earlier guidance should not be counted on,” stated Paul Jacobson, G.M.’s CFO, during a conference call with media.
G.M. also rescheduled a conference call with financial analysts that was set to discuss its first-quarter earnings, pushing it to Thursday due to anticipated changes in tariff policies from the Trump administration.
This decision comes shortly after the administration removed certain electronics, including smartphones and semiconductors, from the harsh tariffs on China due to worries from companies like Apple that these tariffs would lead to price hikes for U.S. consumers.
On Tuesday, Commerce Secretary Howard Lutnick explained that these policy updates were a result of ongoing discussions with domestic automakers. He emphasized that the administration had maintained “constant contact” with them to analyze their operations and ensure appropriate policies were adopted.
“Donald Trump and his administration are committed to revitalizing domestic auto manufacturing,” Mr. Lutnick asserted.
In one of Tuesday’s orders, the president stated that the changes aim to lessen the industry’s dependence on foreign manufacturing while promoting increased domestic production.
For the next year, the administration will provide automakers a tariff exemption for 15 percent of the manufacturer’s suggested retail price for cars assembled in the U.S. This exemption will reduce to 10 percent in the second year, beginning on May 1, 2026, and will be completely eliminated in the third year.
To qualify for this exemption, automakers will need to submit documentation about their expected imports and tariff costs.
In a separate executive order, Mr. Trump outlined new rules to exempt companies that pay certain tariffs from having to pay others. The president articulated that when an import incurs multiple types of tariffs, “these tariffs should not all have a cumulative effect (or ‘stack’ upon one another”) as the combined tariffs would be unnecessarily high.
According to the order, carmakers facing a 25 percent tariff for incoming cars and auto parts will be exempt from steel and aluminum tariffs and tariffs on certain imports from Canada and Mexico.
Moreover, products facing tariffs due to imports from Canada and Mexico will not have additional tariffs imposed on their steel content, yet they will still incur charges for any aluminum content.
Additional tariffs will remain applicable on all items, including the tariffs imposed by Mr. Trump on China and those levied due to trade violations like dumping and unfair subsidies.
The latest regulations maintain an exemption for parts imported from Canada and Mexico that align with the treaty negotiated by Mr. Trump during his first term. Both nations are significant suppliers for the U.S. auto industry.
According to Lenny LaRocca, the U.S. automotive industry leader at KPMG, this exemption gives manufacturers some breathing room. “It allows them extra time to formulate their strategies,” he noted.
However, automakers and suppliers argue that three years isn’t sufficient for reorganizing their manufacturing processes. Even if adjustments are made, producing components in the U.S. may still be more expensive compared to other countries, which would result in higher prices.
Even vehicles made in the U.S. tend to utilize a larger proportion of imported parts that wouldn’t fall under the exemption. Many cars also include parts from Japan, South Korea, or China, all of which are subject to tariffs.
“Today’s relief doesn’t necessarily resolve the long-term problems,” analysts at Bernstein remarked in a note on Tuesday. “American car prices are expected to rise just as economic energy diminishes.”
Despite this, auto executives expressed their appreciation for Mr. Trump addressing at least some of the concerns.
In a statement on Monday, Mary T. Barra, the CEO of G.M., expressed the company’s gratitude for the “productive discussions” held with the president and his administration.
“The president’s leadership is helping create fair competition for companies like G.M. and enabling us to enhance our investments in the U.S. economy,” she remarked.
John Elkann, chairman of Stellantis—parent company of brands like Dodge, Jeep, Ram, and Chrysler—acknowledged the tariff relief measures implemented by President Trump. “We are evaluating how these tariff policies will affect our North American operations and are eager to collaboratively work with the U.S. administration to bolster a competitive American auto industry and boost exports,” he stated.
The executives also implied they were optimistic about ongoing discussions with administration officials possibly resulting in further concessions. “We will keep working closely with the administration to support the president’s vision for a robust and expanding auto industry in America,” noted Jim Farley, CEO of Ford, in a statement.
